Islamabad: The government has proceeded with the implementation of a controversial decision by NEPRA to benefit sugar mill owners. It has disbursed the first installment of PKR 8.2 billion for eight Independent Power Producers (IPPs) owned by five sugar mill owners under the provision of imported fuel. However, these IPPs have been utilizing by-products of sugarcane instead of imported fuel in their plants. Estimates indicate that a total of PKR 20 billion will be paid to these eight power plants, despite objections from the Central Power Purchasing Agency (CPPA-G) and the caretaker government.
At a time when the government is pressuring IPPs to reduce their costs, it is moving forward with the controversial decision to favor those generating electricity from sugarcane bagasse, a burden that will fall on electricity consumers. Sources reveal that in August, CPPA-G made the first payments of PKR 8.2 billion to five power plants, requesting NEPRA to recover this amount as part of the August fuel price adjustment.
According to documents, the government has disbursed PKR 840.3 million to Chenar Energy Limited, PKR 1.48 billion to Chiniot Power Limited, PKR 1.42 billion to Hamza Sugar Mills, PKR 4.1 billion to two units of JDW, and PKR 399.3 million to Rahim Yar Khan Mills in this initial phase. Notably, no funds have been allocated to Al-Moez and Thai Industries in this round. These payments are categorized under fuel costs, based on imported coal, even though these power plants use sugarcane bagasse.
Despite this, payments are being made according to imported coal rates. The Pakistan Muslim League-Nawaz (PML-N) government from 2013 to 2018 had linked payments for electricity produced from bagasse to imported fuel. The caretaker government has opposed these payments and their connection to imported coal since October 2018. However, NEPRA has ordered the implementation of this policy. Caretaker Energy Minister Muhammad Ali has also opposed the 5% annual increase in the Fuel Cost Charge (FCC) since October 2022 without calculating the market price of sugarcane bagasse.
